ROSELIZA HAMID/UITM KELANTAN/2009 TAX PLANNING. ROSELIZA HAMID/UITM KELANTAN/2009 CHAPTER OUTLINE...

ROSELIZA HAMID/UITM KELANTAN/2009

TAX TAX PLANNINGPLANNING


CHAPTER OUTLINE

Definition of income tax Objectives of income tax planning Malaysian tax system Tax strategy Tax calculations


Taxation

Raising of money from individuals and organizations by the state in order to pay for the goods and services its provides.

Forms of tax: Direct: deduction from income Indirect: tax on consumption


TYPES OF TAX

Progressive Increasing proportion of tax as income rises E.g.: Malaysian tax

Proportional Same proportion of income across all level

Regressive Tax takes a decreasing proportion of

income as income rises E.g.: indirect tax


INCOME TAX

Definition of income tax: A tax on income received

Definition of income: any receipt of money or money’s worth

for services rendered, for sale of goods, for use of amenities or facilities, for use of money and so on.


SOURCES OF INCOME

Gains or profits from a business for whatever period of time carried on.

Gains or profits from an employment. Dividends, Interests or Discounts. Rents, Royalties or Premiums. Pensions, annuities or other periodical

payments not falling under any of the foregoing paragraphs.

Gains or profits not falling under any of the foregoing paragraphs.

Special classes of income


INCOME TAX PLANNING

Objectives: To understand anything relates to

personal taxation Be able o minimize the amount of

taxes that have to be paid Be able to maximize disposable

income


MALAYSIAN TAX SYSTEM

Incomes of individuals ate taxed once a year

The income earned in the previous calendar year is assessed and taxed in the year of assessment (YA) which is the following year.

All working Malaysian must submit annual tax returns by 15th April every year.

Current tax scales: marginal tax rate range from 1% - 28%.


MALAYSIAN TAX SYSTEM… cont.Self assessment Taxpayer is required to complete and

submit Return form by the required dates but no notice of assessment sent to the taxpayers.

Taxpayer have to compute their own tax and make full amount at the time return form were sent.

Taxpayers are allowed to make monthly payment to IRB.

Scheduler Tax Deduction Sheme allow tax payment deducted from the monthly salary and remitted to the IRB by the employer.


SCOPE OF TAXATION

Resident individual Non-resident individual Resident company Non-resident company

Resident status (Page 31)


SOURCES OF TAXABLE INCOME

Types of income chargeable under Sec 4 ACP 1967

Employment income: Wages Salaries Remuneration (include virtually forms) Leave pay Fee Commission Bonus Gratuity Perquisite, or Allowances

(e.g.:housing,travelling,entertainment,etc.)


BENEFITS-IN-KIND (BIK)

The gains/profits from an employment chargeable under Section 13 of the Income Tax Act 1967 have been defined to include the value of any BIK provided for the use or enjoyment by the employee. Motocars and related benefits Household furnishings, apparatus &

appliances Others (HP,gardeners,domestic servants,

etc.)


EXEMPTION Tax exempted for individuals:

Leave passages Medical and dental benefit Retirement gratuity Compensation for loss of employment Pensions Death gratuities Scholarships Income from cultural performances approved by

Minister Interest Dividends Royalties Income remitted from outside Malaysia Fees or honorarium for expert services Income derived from research findings


DEDUCTIONNO.

GIFT NOTES

1 Gift/money to government or approved institution

Deductible donation

2 Gift of artifact/manuscript/ painting made to the government /state government

Amount determined by Dept of Museum/Archives

3 Gift in money/contribution in kind for the provisions of facilities in public places for the benefits of disable person

To be determined by local authority

4 Gift of medical equipment for health care facility

Max. RM20,000

5 Gift of painting to the National Art Gallery or any State Art Gallery

Amount determined by the Gallery

6 Gift of money for the provision of library facilities which are accessible to the public and contributions to public libraries/schools/higher education institutions.

Max. RM20,000


RELIEF & REBATE

Personal tax relief http://www.hasil.gov.my/lhdnv3e/individuIndex.jsp?

process=21000&menu=34&expandable=1&pg_title=Tax%20Relief

Tax rebate http://www.hasil.gov.my/lhdnv3e/individuIndex.jsp?

process=21000&menu=42&expandable=1&pg_title=Tax%20Rebate


TYPE OF ASSESSMENT Separate assessment

All income of a married women is automatically assessed separately from that of her husband and no election is required

Combined assessment The wife/husband can elect to have their total income to be

combined and assessed either in the name of husband or wife.

Separation/Divorced Cases The husband continues filling his tax return under his own

tax reference number. Assessed as an individual. The wife reverts to her former tax status prior to the

marriage .Previous tax file reopen/register new file if none. The wife file her own separate tax return and report her

own income including alimony, if any.


DECEASED INDIVIDUAL

Tax treatment on deceased individual: The income for the particular year up to

date of death will be assessed separately.

The notice of assessment will be issued in the name of the legal representative.

The income accrued in the particular year after the date of death constitute the income of the estate of the deceased and is assessed in the name of the executor or administrator of the estate.


MALAYSIAN TAX RATE

Income tax rates for resident individuals range from 0% to 28%. http://www.hasil.gov.my/lhdnv3e/individuIndex.jsp?

process=21000&menu=13&expandable=1

Non-resident individual rates: 28% Companies rates: 26% Trustee: 26% Executor: 26% Deceased person’s estate, associate

& club: same as individual No-resident association: 25%


TAX PLANNING STRATEGY

Calculating on tax payable1. Compute total aggregate income2. Compute assessable income3. Compute chargeable income4. Compute gross tax payable5. Compute net tax payable


TAX EVASION vs AVOIDANCE

Tax evasion Tax evasion involves deliberately and willfully

hiding income, falsely claiming deduction. It is illegal and will results in penalties, fines,

interest charges and a possible jail sentence.

Tax avoidance Reducing tax liability through legal techniques. Involves applying knowledge of the tax code

and regulations to personal income tax planning Results in reducing tax liability hence more

money for spending, saving, investing and donating.

ROSELIZA HAMID/UITM KELANTAN/2009 TAX PLANNING. ROSELIZA HAMID/UITM KELANTAN/2009 CHAPTER OUTLINE...

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